Differing Expert Witness Valuation Conclusions
Differences May Not Be the Result of Advocacy
Judges often make the assumption that business valuation experts always (or almost always) provide the opinions that their clients want and that explains the wide differences they see in valuation opinions. This judicial attitude is fairly widespread based on my experience, and accounts for many decisions where courts “split the valuation baby.”
Reporting on a recent case is illustrative. The writer first stated that the judge’s opinion disagreed with both experts, and that both of them had gotten it (their conclusions) wrong. He went on:
The judge here, Ivy Bernhardson, called these experts “unquestionably qualified.” The problem she identified is just the nature of expert witness assignment in lawsuits. They had been asked to sift through facts, tweak financial assumptions and construct a spreadsheet that gave their respective clients the valuation number they had hoped for.
The Court stated as follows (Kim A. Lund, et al, v. Russel T. Lund, III, et al, County of Hennepin, MN, Court File No. 27-CV-14-20058, Memorandum of Law and Order on Fair Value..., June 2, 2017. Not available online):
Both experts are highly trained and experienced professionals. Both have testified and provided valuation reports in many trials and contested valuation situations. While the Court finds that both [Plaintiff’s Expert] and [Defendant’s Expert] are unquestionably qualified to testify on the issue of valuation, the obvious, zealous advocacy in which they engaged on behalf of their respective clients compromised their reliability in this instance.
Unfortunately for courts and for business valuation experts, the issue quite often is not nearly so neat and simple. Consider these possibilities:
- The appraiser with the lower conclusion is reasonable, and the other appraiser has a much higher conclusion.
- The appraiser with the higher conclusion is reasonable, and the other appraiser has a much lower conclusion.
